Letter to the editor: Taxing natural gas extraction is justified

The world’s largest oil and gas companies, like Exxon Mobil and Shell, are paying billions of dollars to get in on the Pennsylvania Marcellus “play.” They know they are soon likely to pay a state gas extraction tax — as they do in every other state where they drill — and are coming anyhow.

This growth in drilling has created jobs and new local wealth — terrific news in today’s economy. But it puts extraordinary new costs on our communities and the state. For example, we have had to address gas migration that has contaminated drinking water and polluted streams. In the past 2½ years, these companies have been cited for 1,435 regulatory violations — an average of 1.5 per day.

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In light of these facts, it’s irresponsible that Grover Norquist and Patrick Gleason, in the Sept. 16 Opinion article “Energy Tax Would Thwart Pa.’s Gas ‘Gold Rush,’” are attacking efforts to tax natural gas extraction — especially since every major natural-gas-producing state, including Alaska, has a similar tax.

In fact, the 5 percent tax rate we propose already is the law in my neighboring state of West Virginia, which also has a booming natural gas economy. Even Sarah Palin knows it makes sense to tax the natural gas and oil drillers: She increased this tax during her short term as Alaska’s governor.

It’s tragic that Norquist and Gleason toe the industry line without checking the facts. If these companies will be hurt by a modest tax, why did Dutch Royal Shell spend $4.7 billion to buy one of Pennsylvania’s largest drillers?

Last June, an analyst said, “The industry will probably hate me for saying this, but as far as it goes in my world of spreadsheets, the severance tax is not a deal breaker. I don’t believe it will have a huge impact on drilling. It’s not that large.” Even someone who could be considered an industry shill admits that this tax will not affect these companies’ bottom lines.

The companies are saying essentially the same thing. Range Resources said that its “shale play” in the Marcellus is by far its most profitable in the nation, including Arkansas, Louisiana and Texas, where extraction taxes are in place. It projects a 64 percent rate of return for investors.

There is no evidence to support the specious case that if Pennsylvania begins to tax natural gas extraction, mining companies would pack up and leave. These companies can afford to pay a reasonable tax to cover the burden that our taxpayers are now shouldering for environmental protection and cleanup, emergency services for accidents, road repair and other costs that come from drilling sites.

Eight in 10 Pennsylvanians understand this and support joining the ranks of states with fair taxation on drilling. They know that we need to balance the benefits of economic growth with the resources needed to ensure the protection of our environment and our communities.

Readers' Comments (5)

The tax crap is important, but the primary issue is: are we poisoning our water tables? Resolve this first. Open the oil drilling in the Gulf. The hypocrite Obama is spending tax payer IOU's to finance Mexican drilling in the Gulf, while at the same time withholding the economic benefit from American citizens. The tax thing wouldn't be so important if the thieves weren't stealing billions thru profligate spending. Throw the bums out. Your future is dependent on it.

If there were no other taxes, then a severence tax on oil & gas would make sense in PA. However, the already tax the heck out of the oil companies in other ways. We need some bean counter to tell us the total tax burden for a PA company and a TX company then we can compare.

PA is hard up for cash...And as a Dem state its natural reaction is to tax...but maybe ...just maybe they may figure out that aaaaaall those truck drivers, field hands, fuel, hotels, jobs (state income tax) etc are paying taxes to the states coffers. Are they willing to trade a decrease in all of this for a marginal reward in a extraction tax?

considering the state of jobs in PA atm....they should be making sure more PA ppl get in on the action, and that they are not skirting enviormentally,

I have no problem with oil and gas producers paying a tax to fund cleanup and infrastructure..They can probably deduct this as coporate expense. The problem i have, as a royalty owner is that that tax gets paid by me and it does not count as a deduction. It is taken off my net royalty and i still have to pay income tax on the net royalty i earned. So i am paying income tax for money i didnt earn. Now i am lucky to have these interests and they provide an extra supplement to my income,but if you think for one minute the oil companies will be paying this tax you are wrong MR Rendell it will be the royalty owners..